How to Clean Up Your Credit

Everyone should review their credit reports annually and, if necessary, take steps to clean them up—that is, get rid of inaccurate and old information. To clean up your credit report, you’ll need to order copies of your report from the three major credit bureaus (also called credit reporting agencies), review the reports for inaccuracies or old information, and then ask the credit bureaus to correct the information.

Check your credit report

First things first, you’ll want to take a look at your credit report. You can get a free copy of your credit report from AnnualCreditReport.com. Under federal law it’s required to provide one free credit report every 12 months from the three credit-reporting agencies, Experian, Equifax and TransUnion. You can also get a free copy if you were denied credit in the last 60 days.

As financial institutions don’t always report to all three bureaus, each report may look slightly different. It’s important to read each credit report carefully to make sure they’re all correct. This is because you don’t always know which report a potential lender will look at.

Review Your Reports

When reviewing your credit report, you will likely find that there are negative listings pulling down your score that you don’t feel should be there. Studies have shown that over 75% of credit reports contain inaccurate information. The Fair Credit Reporting Act gives you the legal right to question any information on your credit reports that you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear. Rest assured, you can confidently and legally fight to clean up your credit report.

Find errors, dispute them

Relatively speaking, the easiest thing to fix on your credit report is inaccurate information. Clerical errors could easily lead to credit report errors. Don’t overlook these errors because they could be hurting your credit. Submit a credit report dispute letter to have inaccurate information removed.

Create A Plan Of Action

Paying off all your debts at once may seem like an impossible task, and more often than not, it is. That’s why setting up a debt repayment schedule can help you pay off all your debts in a sustainable and manageable way. When you’re setting up your repayment schedule, start by making a list of all your debts and rank them in the order you want to pay them off. One way to prioritise your debts is to rank them in order of decreasing interest rates and pay them off one by one.

Pay down credit card balances

Being careful to make all your payments on time and in full will go along way towards maintaining a good credit score. If you anticipate that you will not be able to make a payment on time, try contacting your creditors to see if they will work with you. Keeping them informed and assuring them that you are doing your best to stay current may convince them not to report delinquencies to the credit bureaus. They may even be willing to set up a payment schedule that better suits your needs.

Don’t apply for new credit

Finally, resist the temptation to open a new credit card, even when a store offers a discount on your purchase for doing so.

Each time you apply for credit is listed on your credit report as a “hard inquiry” and if you have too many within two years, your credit score will suffer. In general, a consumer with good credit can apply for credit a few times each year before it begins to affect their credit score. If you’re already starting with below-average credit, however, these inquiries may have more of an impact on your score and delay your ultimate goal of watching your credit score climb.

How can you clean up your credit report fast?

The credit repair process certainly takes some time. But once you’ve initiated the dispute process on your inaccurate negative items, there are other things you can do to clean up your report quickly.

One way is to reduce or eliminate your revolving debt, particularly from high-interest credit cards. Pay down high balances as quickly as possible and your credit score will benefit from this lower debt utilization.

You could also consider a debt consolidation loan, which transfers your credit card debt to a fixed installment loan. You could save money on your interest rate, and also improve your credit by switching your revolving debt to an installment loan. Your credit mix accounts for 10% of your score; while not huge, every bit helps, especially when looking for short-term solutions.